More Topics

Weather Forecast

Bond sale will fund benefits for retirees

With funding to public education stagnant or decreasing, and health care costs increasing, the District 196 School Board took steps Monday that could help ease some of the financial burdens the school district will face in coming years.

At its Monday meeting, the board approved the sale of Other Post-Employment Benefit bonds -- commonly referred to as OPEB bonds -- to a group led by Wells Fargo Brokerage Services, LLC. The bonds, set at $37,440,000, will help to cover health insurance for retired district employees.

"It tends to be larger districts that do this, not the smaller ones," said Joel Sutter of Ehlers and Associates, the company that helps the district with its bond sales. "There are a lot of districts doing this, so (District 196) is in good company in making that decision."

In the 2008 session, Minnesota legislators passed a bill giving cities, counties, and school districts the opportunity to sell bonds to finance the liabilities for post-employment benefits. Those benefits were written into a lot of contracts years ago when health coverage was cheap. But with insurance costs rising districts are looking at annual costs in the millions of dollars down the line. Many see the OPEB bonds as an important way to make sure they can continue to pay the bills.

The revenue received from the sale of the bonds is put into a trust and can be used at the school board's discretion to pay for retirement health insurance. Previously those expenditures came out of the district's general fund.

"It gives greater flexibility to handle what might happen at the state level," Sutter said.

The timing has certainly paid off for District 196 as well. One of 28 school districts in the state that have currently opted to participate, District 196 received a lower interest rate thanks to its credit rating and the timing of the sale.

Other districts opted to sell in late 2008 at much higher rates, while some are still waiting to sell.

Initial projections for the interest rate were set at 5.25 percent in September. By selling now to Wells Fargo Brokerage Services, the district will receive a 4.6241 percent rate. The lower rate means the total of all tax levies over the life of the bonds will be at least $2.78 million less than the September estimates.

"When I talked to (Jeff Solomon, the district's finance director) in November, the rates were high," Sutter said. "He suggested we look to sell in January to see where they ended up. It worked out well.

"I didn't think they would come down as much as they did, frankly. They have come down substantially."

Last week, the North St. Paul school district sold, and dealt with a rate that was a quarter percent higher than District 196.

School calendars approved

The board approved two calendars for the each of the 2009-10 and 2010-11 school years.

There was special consideration made for a calendar with a school start date before Labor Day, which would include having shortened weeks in the fall rather than a full week off for conferences and development, a shortened winter break, continuing to hold off spring break until the last full week in March, attending school on Good Friday and ending school as early as possible in June.

During the district's survey in late 2008, many respondents expressed a desire to have a school end date as early as possible.

Much of the decision will be based on concessions by the state legislature. The legislature will have to approve school start dates prior to Labor Day in the next two years.

If the legislation for the earlier starts passes, District 196 will go with its pre-Labor day start schedule. If there is no change to the current law, the district will stay with a calendar that has a post-Labor Day start date.

Board officers

re-elected

As the first meeting of 2009, Monday's meeting was also the board's chance to get organized. Each of the officers were re-elected for the 2008 calendar year.